What is the responsible party?
Understanding the Role of the Responsible Party in Business: Key Points to Know
The term "responsible party" is officially defined by the Internal Revenue Service (IRS) as the individual who exercises control over the entity that holds an Employer Identification Number (EIN). In simpler terms, this is the person who signs documents for the company and serves as its main point of contact with the IRS. The responsible party is required to be a natural person, meaning an individual, rather than a corporate entity.
All official correspondence, both digital and physical, from the IRS is directed to the responsible party named on the EIN application form. In essence, this person serves as the designated contact for the organization in all matters related to taxation.
For Limited Liability Companies (LLCs), the IRS mandates that the responsible party must be one of the members. Specifically, in a Single-Member LLC, the responsible party is that lone member.
Additional information on this topic is accessible on the IRS website.
Updating the Responsible Party: Procedures and Considerations
If a company wishes to change its designated responsible party, there are specific protocols to follow. First, if the EIN has already been assigned, or is in the process of being assigned, the IRS must be informed of the change. This can be done by filing form 8822b or during the company's annual tax filings.
Moreover, it is advisable to update any post-formation documents of the company to reflect the change in responsible party, ensuring that all records are current and accurate.
For further guidance on changing the responsible party, the IRS website provides comprehensive information.